John O'Boyle/The Star-LedgerWilliam Dressel, the executive director of the New Jersey League of Municipalities, is seen in this June file photo.

The Securities & Exchange Commission may be creating fresh challenges to local governments with proposed reforms to money market funds, a key component of our financial system and a valued financing tool used by state and local governments.

Money market funds hold more than half of the short-term debt that finances state and municipal governments for public projects such as roads, bridges, water and sewage treatment facilities, and hospitals. Most appealing about these funds is their stable $1 net asset value — which allows investors to treat them as the equivalent of cash, like money in a bank, but with a higher rate of return. Unfortunately, the SEC reforms would change the money market funds’ characteristic stable NAV to a floating value, undermining their key strength.

Without that financing, local governments may be forced to limit projects and staffing, spend more on financing by investing in lower yield products, or increase taxes. Given our current operating environment, these are not viable outcomes.

We join hundreds of national and state organizations — from the public sector, nonprofit, and business communities — and urge the SEC to reconsider such reforms.

John Donnadio, executive director, New Jersey Association of Counties, and William Dressel, executive director, New Jersey State League of Municipalities